Algorithmic trading has sharply increased over the past decade. Does it improve market quality, and should it be encouraged? We provide the first analysis of this question. The NYSE automated quote dissemination in 2003, and we use this change in market structure that increases algorithmic...

We show that the consolidation of orders is important for producing efficient prices, especially during times of high liquidity demand. The NYSE's centralized opening call market performs better than Nasdaq's decentralized opening process on typical trading days. The NYSE is much better than...

Automation and trading speed are increasingly important aspects of competition among financial markets. Yet we know little about how changing a market's automation and speed affects the cost of immediacy and price discovery, two key dimensions of market quality. At the end of 2006 the New York...

This paper examines daily inventory/asset price dynamics using 11 years of NYSE specialist data. The unique length and breadth of our sample enables the first longer horizon testing of market making inventory models - e.g., Grossman and Miller (1988). We confirm such models' predictions that...

We show that market-maker balance sheet and income statement variables explain time variation in liquidity, suggesting liquidity-supplier financing constraints matter. Using 11 years of NYSE specialist inventory positions and trading revenues, we find that aggregate market level and...

We solve a multi-period model of strategic trading with long-lived information in multiple assets with correlated innovations in fundamental values. Market makers in each asset can only condition their pricing functions on trading in each asset. Using daily non-public data from the New York...

My dissertation aims to explain a number of empirical findings about valuation and performance of diversified firms using the model of optimal diversification. It contains two chapters. The first chapter of the dissertation proposes a model of optimally diversified firm and shows that the main...

regarding leverage ratios and announcement effects, and can also explain observed violations of the pecking-order hypothesis.

We consider optimal incentive contracts when managers can, in addition to shirking or diverting funds, increase short term profits by putting the firm at risk of a low probability "disaster." To avoid such risk-taking, investors must cede additional rents to the manager. In a dynamic context,...